Fears about 'jobless recovery' up pressure on Democrats

Republicans trying to use grim job outlook to their advantage

WASHINGTON (MarketWatch) -- President Barack Obama says his administration won't rest until everybody who's looking for work can find a job. But if he wants his party to keep the maximum number of seats in mid-term congressional elections, it looks like he and lawmakers will have to put in some overtime.

On Thursday, Obama's economic adviser Christina Romer told Congress the administration agrees with other analysts that the economy will grow in the third quarter, and beyond. Even so, she said, "unemployment is likely to remain at its severely elevated level," and noted expectations that few jobs will be added through the third quarter of 2010. See earlier story.

The timing could hardly be worse for Democrats in Congress: all House lawmakers and 36 senators are up for election in November 2010.

Members of a new president's party often lose seats in the first election after he takes office, and the eye-popping nationwide unemployment rate of 9.8% can only compound the scenario. In some states where Democrats are vulnerable, it's grimmer. In Nevada, home to Senate Majority Leader Harry Reid, the jobless rate is 13.3%.

Low job growth doesn't equal a "jobless recovery," but that's just the term that some Republicans are brandishing. No Democrat wants to be accused of contributing to such a recovery. But can they avoid it?

They are certainly trying. On Wednesday, House Speaker Nancy Pelosi, D-Calif., convened a forum of economists on Capitol Hill to talk about job-creation and ensuring that the economy doesn't slip back into recession. Ideas included extending jobless benefits, letting the unemployed keep their COBRA health insurance longer, and a job tax credit. Such measures could be called more stimulus, but Pelosi said there are no plans for an additional stimulus package like the one signed by Obama in February.

The White House, meanwhile, is trying to spur job growth by raising the ceiling on loans to small businesses and making it easier for small banks to get money from the Troubled Asset Relief Program.

But skepticism is high about whether such measures would lead to big job gains.

The big deficit doesn't help

An additional trick for Democrats will be to help grow jobs without digging a deeper hole for the deficit. That number is already worrisome: in fiscal 2009, the government ran a deficit of $1.4 trillion, more than triple the amount recorded in 2008. See earlier story.

Republicans are seizing on the tide of red ink, especially as Congress weighs raising the current $12.1 trillion national debt limit. Sen. Judd Gregg of New Hampshire wrote in an op-ed in the Washington Times on Friday that job-creation will be affected if the White House doesn't stop spending so much money.

"Our children will spend their lives struggling to pay off our debt with fewer jobs in an anemic economy because we were unwilling to address our overspending," wrote Gregg, the top Republican on the Senate Budget Committee. He called on Congress to pass spending and debt reforms.

But even as Democrats face potential voter anger for the still-weak economy, it's clear that Republicans shouldn't get too comfortable, either. In South Carolina, a traditionally "red" state, the jobless rate is 11.6%; in North Carolina, where Republican Sen. Richard Burr could be in for a tough fight in 2010, unemployment is 10.8%. In Kentucky, home of Senate Republican Leader Mitch McConnell, it's 10.9%.

Republican ideas

For their part, House Republicans are proposing job-creation measures including allowing small businesses to take a tax deduction equal to 20% of their income, and lowering taxes by reducing the current 15% rate to 10%, as well as reducing the current 10% rate to 5%. They say the tax reductions will free up capital and help small businesses hire more workers. Read more.

Obama's economic team is now meeting twice a week, on average, to discuss job creation, The Wall Street Journal reported Friday. But there are sharp differences about what will work quickly and effectively, the Journal reported, citing a senior administration official.

While Obama's team meets, Republicans are busy beating Democrats in fund-raising. For the second month in a row, the Republican National Committee outstripped the Democratic National Committee, raising $8.8 million in September to the Democrats' $8 million. The Democrats are still ahead overall, however.

As the majority party, Democrats are bracing for a tough 2010, no question. And they recognize the urgency of the unemployment outlook. "We do need to move quickly," Pelosi said on Thursday, saying that the No. 1 subject on Americans' minds was jobs.

American voters will agree with that. But the danger for congressional Democrats is that they and Obama won't, or can't, move quickly enough. And then it won't be hard to agree with Republicans that a jobless recovery is no recovery at all.

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